Pages

Tuesday, October 6, 2015

Condo Loans

HUD hands down stricter condominium lending regulations every
year! In September 2015, HUD stated that
loan approval would not be granted for communities where the Declaration of
Covenants gives the Association approval authority over leasing units. During the question and answer session, it
was added that the Association cannot have the power to evict tenants.

Although not every single loan is directly tied to FHA/HUD, 90%
of all loans are impacted. Other lenders need to be able to sell their
loans on the secondary market, which can’t be done unless they conform to
FHA/HUD demands. So unless you want cash-only home sales (i.e. slum lord
investor owners) dominating your community, you should look to amending your
leasing language.

Even for communities with pre-approval HUD/FHA status (which
must be done every two years), we are seeing each new home loan being
scrutinized for community restrictions. It’s
best to proactively address this situation, before an angry mob of homeowners shows
up at a meeting, unable to sell their homes. Hopefully, your governing
documents give the Board of Directors authority to automatically amend to
comply with federal regulations, without the need for a community vote!

HUD also clarified that the Association can:

Restrict total number/percentage of units that can be rented

Maintain a hardship exception

Require the landlord to provide a copy of the lease

Require that the lease be on a specific form

Set minimum and maximum lease periods

Require that the lease conforms to the Declaration

Require the landlord to check the Registered Sex Offenders list

Require rent to be assigned to Association if the unit owner is
delinquent

Provide corporate leasing restrictions

The
Associationcannot:

Ban all leasing, except in age-restricted and affordable housing
communities

Require the owner to live in the unit for X amount of years before
being allowed to lease